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Someone at the collapsed Virtical pub empire, which is facing allegations of a $120 million GST fraud, transferred more than $700,000 to the wife of the company’s director in a series of mysterious transactions that she told a court she could not remember.
Judith Palasty, wife of former Virtical director John Palasty, told a Federal Court examination on Thursday she had no recollection of more than 20 transactions that Virtical made citing her name from 2023 to 2024.
The transfers, most under the descriptor of “repay loans” or “mortgage”, ranged from $2000 to $250,000. In the space of five days, from August 21 to 26 last year, $270,000 was transferred from Virtical in three transactions for Judith.
The payments were made as the Australian Taxation Office was investigating more than $100 million in GST refunds claimed by the Virtical and had started issuing the group damning assessments around June.
Virtical burst into the spotlight last year after buying up iconic Sydney and Melbourne pubs, such as the Republic Hotel and the Adelphi, in a massive spending spree. However, it collapsed in September following revelations by The Australian Financial Review of the ATO investigation and as a lender owed $90 million forced the companies into liquidation.
For the past month, Virtical liquidators have grilled directors Palasty and Mark Toma over the location of $120 million in GST refunds which the ATO assessed as false and based on $1.2 billion in construction work that did not happen. The group owes $200 million including interest and penalties.
Judith Palasty gave evidence that she was employed by the Virtical group from 2023 to 2024 for 15 hours a week on about $1400 a week net salary and was “doing decorations, and purchasing linen and furnishings”.
However, she told the examination she never lent money to Virtical and had no memory of transactions claiming to pay her mortgage or reimburse her for loans.
On one 5000 transaction she said, “it may have been organised by someone else because I never requested $5000”.
She also had no memory about a share sale agreement between herself and Toma struck in 2023, which Toma told liquidators netted him about $9 million.
“My husband used to do all the dealings with Toma,” she told the court.
Last month, John Palasty, when questioned about several transactions between Virtical and his wife, claimed his family had put $7.1 million of their own money into the business.
He claimed a $250,000 payment from Virtical to his wife on December 5, 2023, was partial reimbursement after they had taken out a second mortgage to fund business operating costs.
“We raised money on the family home of $1 million, which now has a second mortgage on it, to make a $495,000 payment in relation to the gaming tax associated with the Republic Hotel,” he told the court.
Asked about a $10,000 payment from Virtical to his wife on April 11 last year, Palasty claimed it was further repayments of loans.
Palasty, a twice bankrupt developer, took over as Virtical director from Toma, an ex-building materials salesman, in November 2023 after acting as the group’s development manager and senior adviser.
In their examinations, Palasty and Toma pointed fingers at each other over who was responsible for the tens of millions of dollars in GST claims and construction invoices.
Toma did admit to buying $5 million of gold bullion just before Christmas last year, but said he no longer had it. He also claimed to have sold a number of Rolex watches he had purchased to “some bloke out of Melbourne”.
Max Mason covers financial crime, courts and corporate wrongdoing. A Walkley Award winner, Max’s journalism has also received awards from the National Press Club of Australia, the Kennedy Awards and Citibank. Message Max on Signal https://tinyurl.com/MaxMason Connect with Max on Twitter. Email Max at max.mason@afr.com
